RBI flags issues in valuing corporate bonds for mutual funds, others

The development comes close on the heels of broader moves to better supervise corporate bond pricing

The Reserve Bank of India has pointed to the need for addressing potential issues in the way the Rs 23.6-trillion mutual fund industry, as well as other institutions like banks, value corporate bonds.

The central bank’s periodic Financial Stability Report issued on Monday noted that appropriate valuation of these instruments depended on having a good benchmark and transparent corporate spreads.

“However, the extant valuation frameworks for corporate bond book appear to be falling short in terms of both benchmarking issues and valuation methods,” said the report.

This creates a number of issues. It fails to accurately reflect the financial health